The euro rallied to its highest since January 2015 as European Central Bank (ECB) President Mario Draghi took a pass on talking down the common currency in remarks at the Jackson Hole, Wyoming, economic symposium, clearing the way for bulls to keep buying.
The Bloomberg Dollar Spot Index dropped to its lowest since January 2015 after Draghi’s remarks, before mildly paring losses.
The greenback was lower versus all of its G10 peers and US Treasury yields were generally down on the day, after US Federal Reserve Chair Janet Yellen also avoided discussion of monetary policy in an earlier speech.
The afternoon Draghi speech and morning Yellen remarks would have disappointed any traders looking for the ECB president to push back on gains by the euro or for the Fed chair to underscore the potential for another rate hike this year.
Draghi focused his published remarks on the risks of protectionism and said: “Openness to trade is under threat and this means that policies aimed at answering this backlash are a vital part of the policy mix for dynamic growth.”
In answering questions after his speech, he said the ECB has to “remain on guard,” as it has yet to see sustained convergence of inflation to its goal, after which the euro retreated slightly.
Yellen earlier called for modest regulatory reform to maintain financial stability.
The closest she came to the economy was to acknowledge that “substantial progress has been made toward the Federal Reserve’s economic objectives of maximum employment and price stability.”
In Taipei, the New Taiwan dollar rose against the US dollar on Friday, gaining NT$0.015 to close at NT$30.250, up 0.3 percent from last week’s NT$30.332.
The US dollar index posted a weekly loss of about 0.7 percent, with its drop on Friday the steepest since March.
The euro rose more than 1 percent to US$1.1941, its biggest gain in a month, before paring gains to trade around US$1.1920.
Draghi’s decision to refrain from pushing back on the euro’s strength helps position euro to climb to US$1.22 by year-end, Credit Suisse Group AG strategist Shahab Jalinoos said.
CIBC sees euro reaching US$1.2050 in coming months.
After Yellen’s remarks were released at 10am, the US dollar fell against the yen to a fresh daily low at ¥109.12, little changed from last week’s ¥109.19.
Just moments before the remarks, the pair minted a new high for the week at ¥109.84.
The pair subsequently dropped as the yield on the 10-year US Treasury fell to a daily low below 2.17 percent as the Fed chair failed to indicate any particular rush to implement a third interest rate hike this year.
The pound rose to US$1.2887 before offers near US$1.2890 capped gains, a recently defensive pound taking advantage of a weakened greenback. The pound is down 0.1 percent against the US dollar from last week’s US$1.2872.
Additional reporting by CNA
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